How Kentucky’s 1115 Medicaid Work Demonstration Undermines the Program

Toplines

Kentucky’s Medicaid demonstration, which includes work requirements, threatens to reverse coverage gains

Despite evidence on the positive effects of Medicaid coverage on work, the administration’s Medicaid demonstration policy threatens to trigger interruptions or loss of coverage

Earlier this month, Kentucky became the first state to gain approval to launch a demonstration that will make employment an eligibility requirement for Medicaid. Kentucky will be conducting what is known as a Section 1115 demonstration, which allows the U.S. Department of Health and Human Services (HHS) and states to test changes to Medicaid and other public welfare programs without formal legislative action. Shortly after HHS’s approval of Kentucky’s proposal, attorneys representing 15 Kentucky Medicaid beneficiaries filed a federal lawsuit (Stewart v. Hargan) against the HHS secretary to have the Trump administration’s demonstration’s work policies declared unlawful and any work on the Kentucky demonstration halted.

At the heart of the case is the plaintiffs’ claim that the Trump administration’s pursuit of Medicaid experiments that run directly counter to the program’s core objective — to promote access to medical assistance among the nation’s neediest populations so that they can gain health and independence — exceeds the power given the HHS secretary under 1115. Despite evidence suggesting the positive effects of Medicaid coverage on work, the administration’s HHS 1115 policy threatens to do just the opposite — deprive people of assistance by denying Medicaid to those who fail to comply with multiple new work and reporting requirements through sanctions likely to trigger interruptions or loss of coverage. The administration’s theory is that work makes people healthy. But aside from the fact that the correlation between work and health is not the same as causation (healthy people simply may be more likely to be able to work), there is no evidence that punitive work requirements promote health.

Kentucky is one of the nation’s poorest states, and its health insurance coverage gains following its Medicaid expansion led the nation. Of the 651,000 working-age adults enrolled in Medicaid in Kentucky by the end of 2016, more than three-quarters owed their coverage to the Affordable Care Act (ACA). But this demonstration threatens to unwind these gains and undermine Medicaid, the nation’s most important health care safety-net program.

Known as Helping to Engage and Achieve Long Term Health (HEALTH), the Kentucky demonstration purports to test the effects of imposing work requirements and other eligibility limits, although the HHS approval itself does not clearly state the hypotheses that the demonstration will be designed to evaluate. Instead, the approval letter is essentially a statement on the positive health effects of withholding benefits from working-age adults.

The demonstration — which applies to all working-age Medicaid beneficiaries, both ACA expansion and traditional beneficiaries — imposes an array of sanctions for failing to satisfy work and community engagement requirements. Six-month lock-outs also would be imposed for failing to provide information needed to renew annual coverage in a timely fashion, or failing to timely report changes that could affect eligibility such as marriage or a child’s graduation. Benefits such as vision and dental care will be eliminated and will be available only if adults can earn them from meager health savings accounts that they must also use to pay for most regular office visits. In addition, the program imposes premiums higher than any previously approved under a 1115 demonstration — and surpassing those paid by the poorest people who purchase plans on the Affordable Care Act’s marketplace.

Unlike Medicaid demonstrations approved under the Obama administration, no one will gain coverage under Kentucky’s demonstration. On the contrary, officials estimate that as many as 100,000 people may lose coverage, although this figure probably is low since it is not possible to know how many people will be deterred from applying for Medicaid in the future.

Should the Kentucky plan ultimately move forward, the demonstration calls for a six-month implementation period, remarkably short given the sea of complex issues that lie ahead. Here are just a few questions:

What constitutes work or community engagement?

How will the medical frailty exemption be defined, what documentation will be required, and how frequently will people have to certify their exempt status?

How will the state accurately track the work/community engagement status of hundreds of thousands of people, and with what documentation?

What work and educational supports will be provided, how can people obtain them, and what if needed supports are not available?

What will happen to people who experience a health emergency during a sustained period of ineligibility?

What safeguards will be in place to ensure rapid and timely appeals of potentially erroneous adverse eligibility determinations and wrongful denial or termination of assistance?

Finally, how will the requirements of a demonstration that introduces such fundamental changes to the way Medicaid operates be communicated to the population?

The evaluation design will be equally complex. The central question will be the impact of the work requirement on access to coverage and the ability to maintain coverage over time. But every aspect of the demonstration will require measuring: the impact of high premiums; of lockouts for reporting failures as well as premium nonpayment; of withdrawing or impeding coverage on access to care and health status. Moreover, the evaluation should not stop with adults: Given the research showing the potential effects of parental stress on child health, measuring the effects of eliminating access to affordable care for parents on their children’s health and well-being should be a feature of any evaluation design.

In approving this demonstration, the administration has green-lighted an experiment that begins to move Medicaid off its safety-net mooring. The plaintiffs in the Stewart case have asked the court to halt Kentucky’s demonstration and any other work demonstrations going forward. In the absence of such a ruling, which is likely to take time given the complexity of the claims, more approvals may be on the way given the administration’s pledge to fast-track similar state proposals.

Mission

The mission of The Commonwealth Fund is to promote a high-performing health care system that achieves better access, improved quality, and greater efficiency, particularly for society's most vulnerable, including low-income people, the uninsured, minority Americans, young children, and elderly adults.